Gulnara Nolan

Technological change and the monetary policy effectiveness

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Last week I discussed GDP-B and its potential impact on monetary policy. The main takeaway was that, if GDP-B led to a higher production figure it didn’t necessarily mean that monetary policy needed to be tighter or looser – instead it is changes in prices and inflation expectations that remain key.

However, there is a key way that the technological change embedded in GDP-B could well matter for monetary policy – the way it influences how expenditures take place and how they are shifted through time.

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Andrew Coleman

Taxing capital incomes – are we doing it the right way?

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About fifteen years ago, the new Secretary of the Treasury, Dr Caralee McLeish, was part of a World Bank team that put together a dataset measuring the regulations and taxes that small businesses face in different countries. In conjunction with Price Waterhouse, this group (including an extremely famous Harvard economist) worked out the taxes paid by a standardised 20-person business in its first two years of operation, as well as the taxes its employees pay. 

The authors then used this data to ascertain if there was a consistent relationship between the taxes and regulations that businesses in each country face and the amount of investment taking place in each country. There was: the countries with lower tax rates and less onerous regulations tended to have more investment and more foreign investment. The data were considered so useful that the exercise is now repeated annually. One of the original papers by this group of authors, “The effect of corporate taxes on investment and entrepreneurship” (published in 2010) has been cited more than 750 times. 

New Zealand has low levels of capital for a country of its income level and quite high corporate taxes. 

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Gulnara Nolan

Does a new GDP measure change optimal monetary policy?

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At the 61st Annual Meeting of the National Association for Business Economics, The Fed’s chair Jerome Powell gave an insightful speech. The key takeaway from the speech was that in an evolving economy, monetary policy is very data driven.

Powell touched on three aspects of evolving economy: the consequences of an oil price spike, the measurement of output and productivity, and the role of tightness in the labour market.

In this post I will talk about the measurement of output and productivity aspect of the speech and some elements of that which will matter for monetary policy.

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Andrew Coleman

Cook, Elcano, and Circumnavigation

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New Zealand is in the process of commemorating, commiserating and/or celebrating James Cook’s first voyage to New Zealand in 1769. New Zealand was merely one stop on his trip, albeit a lengthy one, which proceeded onwards to Australia, Java (where nearly a third of the crew died from dysentery), Cape Town and back to England.  It was the 25th circumnavigation of the world.

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Gulnara Nolan

Efficacy of monetary policy under uncertainty

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In this post, I am going to talk about the efficacy of monetary policy in the face of uncertainty. 

In an earlier post, I have talked about uncertainty reducing interest rate sensitivity – but does that mean that the efficacy of monetary policy has declined? No, as ultimately, we need to think about how any investment response translates into a change in output!

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Andrew Coleman

Why devotees of Greta need to give her up to save the planet.

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From time to time an unlikely person captures the moment and changes history. Joan of Arc. Harriet Beecher Stowe. Bob Geldof. Jesus of Nazareth. Greta Thunberg. Magic occurs and suddenly something that had been there for an age is seen in a different light. A movement is catalysed.

What is strange about these episodes is that nothing fundamentally changes other than awareness of an existing issue. This, of course, is a fundamental change. Where thousands were blind they now see. Slavery, starvation, or global warming suddenly become the issue of the day and the world changes.

But is awareness, and the noise surrounding it, the right change to save the planet?

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